Investing Locally: Why I Won’t Do a Deal More Than 30 Minutes Away

Investing Locally: Why I Won’t Do a Deal More Than 30 Minutes Away

4 min read
Matt Faircloth

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, N.J., is a developer and owner of commercial and residential property with a mission to “transform lives through real estate.” DeRosa creates partnerships to finance select real estate investments and has a proven track record of providing safe, profitable investment opportunities to their clients.

Experience
Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to hundreds of units in residential and commercial assets throughout the East Coast. Under Matt’s leadership, DeRosa has completed tens of millions in real estate transactions involving private capital, including fix and flips, single family home rentals, mixed-use buildings, apartment buildings, and office buildings.

Matt is an active contributor to the BiggerPockets Blog and has been featured on the BiggerPockets Podcast three times (show #88, #203, and #289). He also regularly contributes to BiggerPockets’ Facebook Live sessions and teaches free educational webinars for the BiggerPockets Community.

Matt authored the Amazon Best Seller Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money. The book is a comprehensive roadmap for investors looking to inject more private capital into their real estate investing business and is a must-read for anyone looking to grow their business by using private lenders and equity investors. Kirkus, the No. 1 trade review publication for books, had this to say about Raising Private Capital: “In this impressively accessible introduction to a complex subject, Faircloth covers every aspect of private funding, presuming little knowledge on the part of the reader.”

Matt and his wife Liz live in New Hope, Penn., with their two children.

Education
Matt earned a B.S. in Industrial and Systems Engineering with a minor in Business from Virginia Tech. (Go, Hokies!)

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Hey BP. I hope you had a great holiday season and are buckled down for a big 2015!

So let’s talk about geography today. It’s a big question that comes up early in the investing game. Where should you invest? There are many philosophies and strategies out there, all of which make sense to those that stand behind them. At the end of the day, it goes back to your goals.

For now, I only do deals within 30 minute drive of my office in Trenton, NJ. That may change in the future, of course. In reading this you may identify with my reasons for doing this and want to do the same. You may also realize that your goals in real estate investing allow you to do business all across the country! Either way, let’s get into it.

The Passive Real Estate Investor

I am a full time investor and had intended to be one when I got started. I didn’t like my day job and wanted to be an entrepreneur. I also loved the numbers and the business of real estate so before I bought my first property, I knew I wanted to be a full timer.

There are many people out there who have no intention of quitting their day jobs anytime soon. These are called Passive Investors. Passive Investing is not to be confused with Passive Income, which is the beneficial way that most rental property income is taxed. Passive Investing is hands off investing. It’s done as a way to take advantage of the benefits of real estate investing without going through the day to day activity that comes along with owning real estate. For them, passive investing is appropriate because they don’t have to put much time in at all to get a return on their money. The money they make is not their primary source of income.

In other words, it’s leveraging Other People’s Time (OPT) to reach your real estate goals. Examples of Passive Investments are turnkey deals, private equity deals, and private loans. The Passive Investor is allowed to make the returns they are looking for based on the performance of the other side of the equation, the Active Investor.

The Active Real Estate Investor

The Active Investor is the house flipper, the active landlord, the General Partner. They are the ones who are doing the day to day activity to drive the investment forward. Passive Investors can invest anywhere they want, as long as they trust the Active Investor and are happy with the proposed returns on their money.

Related: Why Do Some Long Term Real Estate Investors Remain Local?

The Active Investor, on the other hand, is the producer of those returns and is compensated for that. They are dealing with the tenants directly, handling the contractors, and driving to get vacancies filled. The Active Investor needs to be close to the deal with their team to make this happen.

So my choice to be an Active Investor is the core reason I keep my investments close to my office. To take it further, here are things I can leverage by investing in my own backyard. These make me an even stronger Active Investor for the long term:

Building an Efficient Team

I have been able to build a team of support to grow the portfolio over the years. At first this was a group of independent contractors that I used regularly on my properties. In time we have grown it to a team of full time employees. Any one of our properties is within a 30 minute drive for my maintenance staff and my leasing team. They can be very effective and cover our entire portfolio easily with our office as a hub.

If we invested farther away from home, I’d have to find a new local contractor in the area or have one of my team members travel out to the property every time there is an issue.

Leveraging Relationships

I am local and so are all my banks and insurance providers. I can build a very close relationship with them, which has been valuable as we’ve grown.

Finding Deals Easily

Because I invest locally, I have turned over deals in odd places. I have purchased property right around the corner from my home. I own a small apartment building on the same block as my office. A small business owner down the street from my office is one of my best investors. These things came up because I’m in these areas every day, with my eyes open!

Managing the Culture of My Business

In being hands on Active Investor, I have control of the type of business I want to cultivate. We came up with a vision for our company – to Transform Lives Through Real Estate. We do that through offering quality housing to people and exceeding their expectations for customer service, through job training for our employees, and through helping our investors build their long term wealth. Being local to all the investments allows me to walk the properties regularly and meet with my employees and tenants in an effort to make sure we are moving towards that vision.

Related: Demographics: The Telling Real Estate Indicator You Should Analyze Before Investing

When I Will Break My Rule

So with all that said, I will break my rule one day and invest outside of a 30 minute drive from my office. Currently we manage our whole portfolio from our offices in Trenton and don’t require management on the site of our properties, simply because they aren’t large enough. I will do a deal that has enough units to justify an on-site management office, and in my areas that’s usually the case above 50 units.

With that in place, I can continue to hold the vision for our company without stretching my local team too far. We aren’t too far from reaching this, but until then I am keeping it close to home!

So let me know what you think – any other Active Investors out there that keep it local like me? Anyone actively invest properties from afar?

Let’s get a conversation going!